Indian startups have experienced a significant rise in venture debt funding, with business-to-business (B2B) being the most attractive sector for venture debt in 2023, according to the India Venture Debt Report by Stride Ventures. The report’s second edition revealed that B2B replaced fintech as the top sector, followed closely by the consumer and electric vehicles sector. The report emphasized that venture debt has become a crucial growth enabler for Indian startups, and its non-dilutive characteristics have been positively received by investors, unlocking growth opportunities for startups.
The survey, which included 150 startup founders and venture capital (VC) firms, showcased investor sentiments concerning various factors driving the venture debt ecosystem. In 2023, 82% of founders said they prioritize profitability and scaling, while 79% of VCs expressed a focus on profitability, with 21% concentrating on growth. This is in contrast to 2022, where 55% of VCs and 68% of founders opted to focus on growth rather than profitability.
Moreover, 71% of early-stage startup founders plan to raise venture debt in 2023, compared to 50% of late-stage founders and 20% of growth-stage founders. Further, 74% of VCs recommended their portfolio companies take on venture debt in 2023. The Stride Ventures report also highlights that the majority of founders and VCs consider engaging with bank limits as the most important value-added service offered by a venture debt fund, followed by advisory on corporate financial services.
The report offers a macro and micro perspective on the startup landscape, providing an overview of sentiments for key stakeholders and an actionable outlook on what to expect from India’s venture debt ecosystem in 2023. The SaaS, healthtech, and agritech sectors received fewer venture debt prospects, suggesting they are prioritizing profitability and seeking venture debt as a means of achieving growth, while also valuing value-added services from venture debt funds.
Indian Startups See Huge Surge in Venture Debt Funding, B2B Sector Ranks Top in 2023
- Indian startups have seen a meteoric rise in venture debt funding
- B2B is the most attractive sector for venture debt in 2023, followed by the consumer and electric vehicles sector
- Venture debt is a crucial growth enabler for Indian startups, unlocking growth opportunities
- 82% of founders prioritize profitability and scaling, while 79% of VCs express a focus on profitability
- 71% of early-stage startup founders plan to raise venture debt in 2023
- Engaging with bank limits is the most important value-added service offered by a venture debt fund, followed by advisory on corporate financial services
- SaaS, healthtech, and agritech sectors received fewer venture debt prospects, indicating they prioritize profitability and seek venture debt as a means of achieving growth.
In conclusion, the India Venture Debt Report highlights the growing popularity of venture debt as a crucial growth enabler for Indian startups. The report underscores the significance of venture debt as a non-dilutive financing option and how its positive investor outlook has enabled it to unlock growth opportunities for startups. The report’s findings also suggest a shift in priorities for both founders and VCs, with profitability becoming a more significant focus in 2023 than growth. Moreover, the report provides valuable insights into the most attractive sectors for venture debt, preferred value-added services, and future expectations from India’s venture debt ecosystem.
